DAKT - Daktronics Inc. Announces Second Quarter Fiscal 2022 Results
BROOKINGS, S.D., Dec. 01, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported results for fiscal 2022 second quarter which ended October 30, 2021.
Q2 FY2022 financial highlights:
- Net sales increased to $164.5 million as compared to Q2 FY2021 net sales of $127.4 million as a result of strong demand and eased pandemic related site restrictions.
- Operating income decreased to $4.4 million as compared to Q2 FY2021 operating income of $6.7 million due to inflation in materials and freight costs and increased personnel spend compared to prior year.
- Net income of $2.4 million, and earnings per diluted share of $0.05 compared to net income of $3.4 million, and $0.08 earnings per diluted share, for Q2 FY2021.
- Second quarter orders of $163.7 million, grew 20.7% year-over-year, driven by increased market activity as the pandemic restrictions eased and economic conditions improved, including record bookings in Commercial and High School Park and Recreation business units.
- Product order backlog of $282 million compared to $201 million a year earlier.(1) The increase was driven by strong order volume offset by muted conversion to sales due to supply chain challenges.
- Balance sheet remains strong. There were no advances under the loan portion of the line of credit compared to $15 million borrowed at the end of Q2 FY2021.
Reece Kurtenbach, chairman, president and chief executive officer stated, "Market demand continued to return to pre-pandemic levels and our order bookings grew through the first half of the year. Our operating expenses have increased as we adjust our capacity to support increased demand levels and convert our record high backlog to sales. At the same time, material, labor, and freight availability constraints are creating headwinds in lead times and are causing inflationary cost pressures."
Outlook
Kurtenbach added, "We expect dynamic supply chain conditions to persist through next calendar year. As we continue to work through supply chain challenges, inflationary pressures, and evolving pandemic impacts, we expect volatility in our pricing, order and revenue cycles, and production costs in the near term. Over the long-term, we believe the fundamentals of the audiovisual industry are strong and are poised for continued growth. To position us to benefit from both near term growth and long-term trends, we are actively investing in capacity, in new technologies, and in different markets to make Daktronics and our solutions the preferred choice for new and existing customers."
Second Quarter and Year to Date Results
Orders for the second quarter of fiscal 2022 increased 20.7 percent as compared to the second quarter of fiscal 2021. Each business unit's order volume grew through the first half of fiscal 2022 reflecting the recovery from the impact of the global pandemic among our customers. Commercial business unit orders increase is due to strong demand from customers using systems for on-premise promotion and out-of-home advertising. High School Park and Recreation continued growth for the year and quarter is driven by the adoption of video displays for sporting and educational use. Transportation order levels increased as project planning and approval activities resumed and moved forward for displays used in intelligent transportation systems and mass transit venues. The International business unit orders for the quarter were less than last year, same quarter, but improved through the first half of the year. The pandemic recovery in regions around the world has varied. While some countries have eased travel restrictions and we have seen business in those locations increase, other countries still continue to deal with the ongoing challenges of the pandemic. Live Events business unit orders were similar to last year second quarter and increased on a year to date basis.
Net sales increased by 29.1 percent in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021. Net sales for the six months ended Oct. 30, 2021 increased by 14.1 percent as compared to the same period one year ago. Material supply and labor shortages are creating an increase in lead times and extending the timing of converting some orders to sales in the near-term. This has created a larger than typical backlog, which we expect to fulfill in future quarters.
Gross profit as a percentage of net sales was 19.6 percent for the second quarter of fiscal 2022 as compared to 26.2 percent a year earlier and 20.8 percent for the six months ended Oct. 30, 2021 as compared to 25.5 percent for the six months ended a year earlier. The decrease in gross profit is primarily related to increased input costs including material, freight, and tariff costs and increased personnel spend compared to prior year during the pandemic. In addition, during the second quarter of fiscal 2022 we had more large project sales which generally have lower gross profit because of the competitive nature of large projects.
Operating expenses for the second quarter of fiscal 2022 were $27.9 million, compared to $26.7 million for the second quarter of fiscal 2021 or an increase of 4.5 percent and $54.4 million for the six months ended Oct. 30, 2021 as compared to $52.9 million for the six months ended a year prior. The increases were primarily associated with increases in personnel related expenses.
Operating income as a percent of sales for the quarter was 2.7 percent as compared to an operating income as a percent of sales of 5.2 percent during the second quarter of fiscal 2021 and 3.2 percent for six months ended Oct. 30, 2021 as compared to 6.0 percent for the six months ended a year prior.
The effective tax rate expense for the second quarter of fiscal 2022 was 29.6 percent compared to an effective tax rate expense of 41.1 percent for the second quarter of fiscal 2021. The effective tax rate expense for the six months ended Oct. 30, 2021 was 27.0 percent compared to an effective tax rate expense of 26.2 percent for the six months ended a year prior. The difference in tax rates is primarily driven by a decrease in estimated tax credits proportionate to an increase in estimated pre-tax earnings in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2022.
Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2022 were $61.6 million, which compares to $74.4 million at the end of the second quarter of fiscal 2021 and $80.4 million at the end of fiscal 2021. There were no advances under the loan portion of the line of credit compared to $15 million borrowed at the end of the second quarter of fiscal 2021. Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a negative $12.3 million for the first six months of fiscal 2022, as compared to a positive free cash flow of $34.5 million for the same period in fiscal 2021. Cash provided from or used in operating activities differed as compared to last year due to an increase in accounts receivable and inventory required to support the increased order volume. Net investment in property and equipment was $3.7 million for fiscal 2022, as compared to $5.4 million for fiscal 2021.
(1) Backlog is not a measure defined by accounting principles generally accepted in the United States of America ("GAAP"), and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. For more information related to backlog, see Part I, Item 1. Business of our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.
About Daktronics
Daktronics has strong leadership positions in, and is the world's largest supplier of, large-screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems. The company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units: Live Events, Commercial, High School Park and Recreation, and Transportation, and one International business unit. For more information, visit the company's website at: www.daktronics.com, email the company at investor@daktronics.com, call (605) 692-0200 or toll-free (800) 843-5843 in the United States, or write to the company at 201 Daktronics Dr., P.O. Box 5128, Brookings, S.D. 57006-5128.
Safe Harbor Statement
Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act. These forward-looking statements reflect the Company's expectations or beliefs concerning future events. The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation and other risks described in the company's SEC filings, including its Annual Report on Form 10-K for its 2021 fiscal year. Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.
| For more information contact: |
| INVESTOR RELATIONS: |
| Sheila M. Anderson, Chief Financial Officer |
| Tel (605) 692-0200 |
| Investor@daktronics.com |
Daktronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended |
| Six Months Ended |
| October 30, |
| October 31, |
| October 30, |
| October 31, |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| Net sales |
| $ |
| 164,477 |
| $ |
| 127,367 |
| $ |
| 309,209 |
| $ |
| 271,011 |
| Cost of sales |
| 132,213 |
| 94,053 |
| 244,757 |
| 201,936 |
| Gross profit |
| 32,264 |
| 33,314 |
| 64,452 |
| 69,075 |
| Operating expenses: |
| Selling |
| 12,482 |
| 12,654 |
| 24,277 |
| 24,210 |
| General and administrative |
| 8,201 |
| 7,264 |
| 15,772 |
| 14,388 |
| Product design and development |
| 7,196 |
| 6,737 |
| 14,358 |
| 14,269 |
| 27,879 |
| 26,655 |
| 54,407 |
| 52,867 |
| Operating income |
| 4,385 |
| 6,659 |
| 10,045 |
| 16,208 |
| Nonoperating (expense) income: |
| Interest (expense) income, net |
| (59 |
| ) |
| (18 |
| ) |
| 78 |
| (6 |
| ) |
| Other (expense) income, net |
| (952 |
| ) |
| (837 |
| ) |
| (1,820 |
| ) |
| (1,464 |
| ) |
| Income before income taxes |
| 3,374 |
| 5,804 |
| 8,303 |
| 14,738 |
| Income tax expense |
| 1,000 |
| 2,388 |
| 2,244 |
| 3,855 |
| Net income |
| $ |
| 2,374 |
| $ |
| 3,416 |
| $ |
| 6,059 |
| $ |
| 10,883 |
| Weighted average shares outstanding: |
| Basic |
| 45,350 |
| 44,893 |
| 45,271 |
| 44,808 |
| Diluted |
| 45,499 |
| 44,977 |
| 45,490 |
| 44,947 |
| Earnings per share: |
| Basic |
| $ |
| 0.05 |
| $ |
| 0.08 |
| $ |
| 0.13 |
| $ |
| 0.24 |
| Diluted |
| $ |
| 0.05 |
| $ |
| 0.08 |
| $ |
| 0.13 |
| $ |
| 0.24 |
Daktronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
| October 30, |
| May 1, |
| 2021 |
| 2021 |
| (unaudited) |
| ASSETS |
| CURRENT ASSETS: |
| Cash and cash equivalents |
| $ |
| 59,727 |
| $ |
| 77,590 |
| Restricted cash |
| 1,877 |
| 2,812 |
| Accounts receivable, net |
| 95,156 |
| 67,808 |
| Inventories |
| 94,790 |
| 74,356 |
| Contract assets |
| 40,231 |
| 32,799 |
| Current maturities of long-term receivables |
| 2,167 |
| 1,462 |
| Prepaid expenses and other current assets |
| 10,897 |
| 7,445 |
| Income tax receivables |
| 322 |
| 731 |
| Total current assets |
| 305,167 |
| 265,003 |
| Property and equipment, net |
| 56,084 |
| 58,682 |
| Long-term receivables, less current maturities |
| 6,357 |
| 1,635 |
| Goodwill |
| 8,293 |
| 8,414 |
| Intangibles, net |
| 1,706 |
| 2,083 |
| Investment in affiliates and other assets |
| 28,259 |
| 27,403 |
| Deferred income taxes |
| 11,940 |
| 11,944 |
| Total non-current assets |
| 112,639 |
| 110,161 |
| TOTAL ASSETS |
| $ |
| 417,806 |
| $ |
| 375,164 |
Daktronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(in thousands)
| October 30, |
| May 1, |
| 2021 |
| 2021 |
| (unaudited) |
| LIABILITIES AND SHAREHOLDERS' EQUITY |
| CURRENT LIABILITIES: |
| Accounts payable |
| $ |
| 65,963 |
| $ |
| 40,251 |
| Contract liabilities |
| 70,158 |
| 64,495 |
| Accrued expenses |
| 32,683 |
| 30,672 |
| Warranty obligations |
| 10,285 |
| 10,464 |
| Income taxes payable |
| 850 |
| 738 |
| Total current liabilities |
| 179,939 |
| 146,620 |
| Long-term warranty obligations |
| 15,493 |
| 15,496 |
| Long-term contract liabilities |
| 10,707 |
| 10,720 |
| Other long-term obligations |
| 9,809 |
| 7,816 |
| Long-term income taxes payable |
| 682 |
| 548 |
| Deferred income taxes |
| 373 |
| 410 |
| Total long-term liabilities |
| 37,064 |
| 34,990 |
| TOTAL LIABILITIES |
| 217,003 |
| 181,610 |
| SHAREHOLDERS' EQUITY: |
| Common stock |
| 61,175 |
| 60,575 |
| Additional paid-in capital |
| 47,412 |
| 46,595 |
| Retained earnings |
| 102,075 |
| 96,016 |
| Treasury stock, at cost |
| (7,101 |
| ) |
| (7,297 |
| ) |
| Accumulated other comprehensive loss |
| (2,758 |
| ) |
| (2,335 |
| ) |
| TOTAL SHAREHOLDERS' EQUITY |
| 200,803 |
| 193,554 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $ |
| 417,806 |
| $ |
| 375,164 |
Daktronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six Months Ended |
| October 30, |
| October 31, |
| 2021 |
| 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES: |
| Net income |
| $ |
| 6,059 |
| $ |
| 10,883 |
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
| Depreciation and amortization |
| 7,789 |
| 8,564 |
| Gain on sale of property, equipment and other assets |
| (676 |
| ) |
| (162 |
| ) |
| Share-based compensation |
| 1,012 |
| 1,047 |
| Equity in loss of investees |
| 1,565 |
| 1,145 |
| Provision for doubtful accounts |
| (588 |
| ) |
| 153 |
| Deferred income taxes, net |
| (41 |
| ) |
| 2 |
| Change in operating assets and liabilities |
| (23,654 |
| ) |
| 18,343 |
| Net cash (used in) provided by operating activities |
| (8,534 |
| ) |
| 39,975 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |
| Purchases of property and equipment |
| (4,507 |
| ) |
| (5,776 |
| ) |
| Proceeds from sales of property, equipment and other assets |
| 760 |
| 341 |
| Proceeds from sales or maturities of marketable securities |
| — |
| 247 |
| Purchases of and loans to equity investees |
| (6,129 |
| ) |
| (903 |
| ) |
| Net cash used in investing activities |
| (9,876 |
| ) |
| (6,091 |
| ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: |
| Principal payments on long-term obligations |
| (200 |
| ) |
| (220 |
| ) |
| Proceed from exercise of stock options |
| 3 |
| — |
| Tax payments related to RSU issuances |
| (199 |
| ) |
| (125 |
| ) |
| Net cash used in financing activities |
| (396 |
| ) |
| (345 |
| ) |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH |
| 8 |
| (498 |
| ) |
| NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
| (18,798 |
| ) |
| 33,041 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |
| Beginning of period |
| 80,402 |
| 40,412 |
| End of period |
| $ |
| 61,604 |
| $ |
| 73,453 |
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
| Three Months Ended |
| Six Months Ended |
| October 30, |
| October 31, |
| Dollar |
| Percent |
| October 30, |
| October 31, |
| Dollar |
| Percent |
| 2021 |
| 2020 |
| Change |
| Change |
| 2021 |
| 2020 |
| Change |
| Change |
| Net Sales: |
| Commercial |
| $ |
| 34,463 |
| $ |
| 30,356 |
| $ |
| 4,107 |
| 13.5 |
| % |
| $ |
| 67,244 |
| $ |
| 64,862 |
| $ |
| 2,382 |
| 3.7 |
| % |
| Live Events |
| 59,396 |
| 37,822 |
| 21,574 |
| 57.0 |
| 111,783 |
| 89,296 |
| 22,487 |
| 25.2 |
| High School Park and Recreation |
| 32,747 |
| 27,578 |
| 5,169 |
| 18.7 |
| 60,641 |
| 56,521 |
| 4,120 |
| 7.3 |
| Transportation |
| 14,053 |
| 15,323 |
| (1,270 |
| ) |
| (8.3 |
| ) |
| 26,611 |
| 29,821 |
| (3,210 |
| ) |
| (10.8 |
| ) |
| International |
| 23,818 |
| 16,288 |
| 7,530 |
| 46.2 |
| 42,930 |
| 30,511 |
| 12,419 |
| 40.7 |
| $ |
| 164,477 |
| $ |
| 127,367 |
| $ |
| 37,110 |
| 29.1 |
| % |
| $ |
| 309,209 |
| $ |
| 271,011 |
| $ |
| 38,198 |
| 14.1 |
| % |
| Orders: |
| Commercial |
| $ |
| 58,358 |
| $ |
| 32,590 |
| $ |
| 25,768 |
| 79.1 |
| % |
| $ |
| 96,687 |
| $ |
| 58,123 |
| $ |
| 38,564 |
| 66.3 |
| % |
| Live Events |
| 40,501 |
| 40,684 |
| (183 |
| ) |
| (0.4 |
| ) |
| 90,187 |
| 82,544 |
| 7,643 |
| 9.3 |
| High School Park and Recreation |
| 25,651 |
| 20,117 |
| 5,534 |
| 27.5 |
| 71,362 |
| 48,216 |
| 23,146 |
| 48.0 |
| Transportation |
| 14,699 |
| 11,633 |
| 3,066 |
| 26.4 |
| 36,044 |
| 24,722 |
| 11,322 |
| 45.8 |
| International |
| 24,498 |
| 30,642 |
| (6,144 |
| ) |
| (20.1 |
| ) |
| 51,173 |
| 44,214 |
| 6,959 |
| 15.7 |
| $ |
| 163,707 |
| $ |
| 135,666 |
| $ |
| 28,041 |
| 20.7 |
| % |
| $ |
| 345,453 |
| $ |
| 257,819 |
| $ |
| 87,634 |
| 34.0 |
| % |
Reconciliation of Free Cash Flow *
(in thousands)
(unaudited)
| Six Months Ended |
| October 30, |
| October 31, |
| 2021 |
| 2020 |
| Net cash (used in) provided by operating activities |
| $ |
| (8,534 |
| ) |
| $ |
| 39,975 |
| Purchases of property and equipment |
| (4,507 |
| ) |
| (5,776 |
| ) |
| Proceeds from sales of property and equipment |
| 760 |
| 341 |
| Free cash flow |
| $ |
| (12,281 |
| ) |
| $ |
| 34,540 |
*In evaluating its business, Daktronics considers and uses free cash flow as a key measure of its operating performance. The term free cash flow is not defined under accounting principles generally accepted in the United States of America ("GAAP") and is not a measure of operating income, cash flows from operating activities or other GAAP figures and should not be considered alternatives to those computations. Free cash flow is intended to provide information that may be useful for investors when assessing period to period results.